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LGT Navigator: Macron to face Le Pen in election run-off

April 11, 2022

In the French presidential election, Emmanuel Macron and Marine Le Pen qualify for the second voting round on April 24. This week, financial markets focus on the ECB's monetary policy decision. Market participants expect indications on a possible first interest rate hike on Thursday.

Elections France

Asian stock exchanges start the new trading week with significant losses. In Hong Kong, the Hang Seng Index loses more than -2.5%. The Shanghai Composite sheds -1.9% and the Nikkei declines in Tokyo -0.9%. The unexpectedly strong increase in Chinese producer prices in March caused uncertainty. Thus, the producer price index rose by +8.3% year-on-year. Analysts had expected an increase of +7.9%. At +1.5%, consumer prices also climbed somewhat more strongly than forecast.

In the US, futures also point to a weak opening. This, after the major indices ended the first trading week in April with some heavy weekly losses (S&P 500 -1.3%, Dow Jones -0.3%, Nasdaq Composite -3.9%).

Duel between Macron and Le Pen

In France, the presidential elections are entering the crucial phase. On Sunday, the French voted in a first round, and as expected, incumbent President Emmanuel Macron and his opponent Marine Le Pen received the most votes. Macron secured an unexpectedly clear lead over Le Pen (around 23%) with around 28% of the vote. This means there will be a runoff between Macron and Le Pen on April 24, as there was in the 2017 elections. At the time, the current leader of the far-right Rassemblement National (formerly Front National) lost with 33.9% of the vote. This time, the elections in Europe's second-largest economy threaten to become a nail-biter, as Le Pen has been steadily gaining ground in polls in recent weeks. Until the outbreak of war between Russia and Ukraine, the Eurosceptic was still touting her ties to Kremlin leader Vladimir Putin in the election campaign. If she wins the elections, France could lose its role as an important partner in the European front against Russia. In addition, France's cooperation with NATO is also up for debate, as Le Pen has announced.

ECB to set the course

This week, the financial markets are looking to Frankfurt, where the European Central Bank (ECB) will determine the future course of monetary policy on Thursday. Like the Federal Reserve, the ECB is considering normalizing monetary policy. This emerges from the ECB's meeting minutes, which were published last week. According to the minutes, various central bankers at the last meeting called for a first interest rate step as early as summer in order to curb high inflation. Other members of the Governing Council, however, wanted to wait and see how the war in Ukraine would play out in order to reduce the risk of a recession. The ECB eventually agreed on a compromise that would end the securities purchase program by the fall. This promises to make the monetary policy debate heated. After all, the annual inflation rate has risen once again since the last meeting, reaching a record +7.5% in March. In the long term, the ECB is aiming for an annual inflation rate of 2% to ensure price stability. 

Inflation expectations in Germany on the rise

German households are bracing themselves for further price rises. Inflation expectations for the coming twelve months rose to +5.8% in March, the Bundesbank reported on Friday. This is the highest value since the start of data collection in 2019. In February, households had still expected a price increase of +4.7%. Five-year inflation expectations rose to +4.8%, after 4.5% in the previous month. Anchoring inflation expectations is one of the most important tasks of a credible monetary policy. If market participants lose confidence in stable prices, there is a risk of an inflationary spiral, with higher wage demands leading to price increases at companies, for example. 

Ifo considers consequences of coal embargo to be manageable

The Ifo Institute has commented on the coal embargo against Russia. The measure would be unpleasant in the short-term but bearable, the Munich-based institute said. ”The impact is likely to be much smaller compared to an import ban on Russian natural gas“, it said. Germany imported more than half of its hard coal from Russia in 2021. However, this demand could also be replaced by lignite, which could be imported from other countries, the research institute said. Ifo does not expect a long-term shortage of coal supply. 


Economic Indicators April 11

MEZ Country Indicator Last period
03:30 China Consumer price index (March, y/y) +0.9%
08:00 UK Gross domestic product (y/y) +6.6%
08:00 UK Industrial production (February, m/m) +0.7%


Earnings Calender April 11

Country Company Period
CH Burkhalter Holding  Q4 2021


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